ANS returns to health

The Investment Column
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The Independent Online
Associated Nursing Services, the nursing homes operator, has had a chequered recent history. The early 1990s were marked by unfortunate diversifications, less than conservative accounting policies and a momentary splash of red ink.

Since 1994, when ANS used the strength of the shares (which peaked at 297p) to raise pounds 10m from shareholders, it has run into the general gloom surrounding state financing of care of the elderly. That coincided with an ambitious expansion programme, and as a result the share price has fallen steadily and stands at 139p, up a penny yesterday.

Results for the year to March did little to improve sentiment, though they carried an encouraging message. Profits dipped from pounds 2.63m to pounds 2.51m in the year to March, which translated into underlying growth of 14 per cent when pounds 479,000 of one-off charges were added back.

Those costs should help assuage some of the concerns surrounding the group. Roughly pounds 300,000 related to higher finance charges following a decision to tighten up the treatment of capitalised interest. A further pounds 200,000 or so represented the cost of shedding seven people as a result of cutting out the regional layer of management.

ANS appears to have aimed well in targeting areas for new homes, particularly its decision to concentrate on the South-east of England. The six operations it started during the year all are now profitable.

Overall occupancy has moved up from 88 to 90 per cent and ANS is getting to grips with the four homes hit by local authority financing problems.

The group is the biggest in London, with 750 beds built or under development. Profits of pounds 3.3m this year would put the shares on a forward rating of 9. Given recent corporate activity, ANS could be attractive to a bidder. Hold.